As Inflation Soars, Venezuela's Leader Opts For Drastic Steps

A woman and her child are barred from a supermarket that was closing its doors to ration milk products in Caracas on Nov. 15. Venezuela's President Nicolas Maduro, who was elected after the death of Hugo Chavez in March, is facing growing criticism over economic problems that include shortages of basic goods and inflation that's topped 50 percent this year.

Venezuelans line up outside a branch of an electronics store in Caracas on Nov. 11. President Maduro ordered electronics stores to lower their prices as a measure against inflation, causing masses of people to queue outside stores in hopes of grabbing bargains.

Miguel GutierrezEPA/Landov

Listen

Listening...

/

Originally published on December 11, 2013 12:30 pm

Venezuela's President Nicolas Maduro has closely followed the economic policies of his predecessor, and by one measure, he has already outpaced Hugo Chavez — inflation.

Inflation has hit 54 percent this year, giving Venezuela one of the highest rates in the world and far surpassing the relatively high rates under Chavez, which sometimes topped 20 percent a year.

Many basic goods like milk and toilet paper are in short supply, and this has cut into support for Maduro, who was the vice president under Chavez and was elected in April, a month after the former president died of cancer.

Economists say that many of Maduro's policies are only making things worse — like ordering business owners to empty their warehouses and slash prices. Shoppers are delighted but shop owners are dismayed.

Maduro's moves have included drastic measures, like a raid on a bicycle warehouse that was staged for television cameras.

Caracas City Administrator Jaqueline Farias said the owners were hoarding the bikes to drive up prices.

Maduro has also threatened to put a cap on business profits. His government has arrested dozens of business owners and forced stores accused of price gouging to discount their merchandise by 50 percent or more.

Maduro, in a speech to university students, called for volunteers to serve as roving price vigilantes in shopping malls.

At the Caracas City Market Mall, the lines can get a little unruly. But as she waits her turn to buy a computer for half price, college student Giovani Morales praises the government measures.

"Store owners can't be allowed to mark up prices 1,000 percent." Morales says. "They're not being asked to give things away, but to charge fair prices."

Retailers admit that some price gouging is going on. But they say they're being unfairly singled out.

Venezuela's government gets around 90 percent of its revenue from oil, so the country is prone to economic swings based on the world oil price. And the country has gone through periods of skyrocketing inflation, like the year 1996, when prices soared more than 100 percent.

But this year is worse than any of those under Chavez, who led the country from 1999 until his death this year.

Most consumer goods in Venezuela are imported, but the government rations the sales of U.S. dollars that merchants need to make those overseas purchases. That forces them to buy dollars on the black market, where the exchange rate is 10 times the official rate. To avoid selling at a loss, they then must jack up prices.

TV news footage captured the frustration of a wailing and screaming computer store owner in the city of Puerto La Cruz who was arrested for price gouging. In Caracas, merchants say they're also feeling the pressure.

"In the past week, I've received more insults than in my entire life," says David Barros, who sells backpacks at the mall. "They've called me a thief, a price gouger, a dog and a miserable wretch. But this is not my fault."

Rather than profiting from the economic distortions, Barros and his business partner Andres Simon describe themselves as victims.

Simon shows off a flimsy backpack worth about $25. But because it was purchased with black market dollars, he must charge the equivalent of about $250 to make a small profit. Not surprisingly, sales have fallen 70 percent compared with last year.

In the short term, Maduro's measures appear to have worked. Ruling party candidates won two-thirds of the mayoral posts up for grabs in nationwide elections on Sunday. But Simon predicts that the forced price cuts will only lead to more shortages.

To make his point, Simon goes to nearby Samsung and Sony stores, where shelves are bare. He says the owners were forced to liquidate at half price. Now, instead of importing more computers and TVs and selling at a loss, they've decided to shut down.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

And now to Venezuela, where galloping inflation has put many basic goods out of the reach of average consumers. At 54 percent, Venezuela has one of the highest annual inflation rates in the world. So, the socialist government has been ordering business owners to empty their warehouses and slash prices. Shoppers are delighted but storeowners are dismayed.

John Otis reports from Caracas.

JOHN OTIS, BYLINE: Amid runaway inflation and shortages of things like milk and toilet paper, President Nicolas Maduro claims that unscrupulous capitalists are waging an economic war against his government. So, Maduro has taken some drastic measures, like this raid on a bicycle warehouse staged for television news cameras.

JAQUELINE FARIAS: (Foreign language spoken)

OTIS: Caracas City Administrator Jaqueline Farias claimed the owners were hoarding the bikes to drive up prices.

To combat inflation, Maduro has threatened to put a cap on business profits. His government has arrested dozens of business owners and forced stores accused of price gouging to discount their merchandise by 50 percent or more.

NICOLAS MADURO: (Foreign language spoken)

OTIS: Maduro, in a speech to university students, called for volunteers to serve as roving price vigilantes in shopping malls.

(SOUNDBITE OF TRAFFIC)

OTIS: As a result, throngs of shoppers are lining up outside stores that have either been forced to offer discounts or are doing so voluntarily to avoid government scrutiny.

(SOUNDBITE OF CROWD)

OTIS: At the Caracas City Market Mall, the lines can get a little unruly. But as she waits her turn to buy a computer for half price, college student Giovani Morales praises the government measures.

GIOVANI MORALES: (Foreign language spoken)

OTIS: Storeowners can't be allowed to mark up prices 1,000 percent, Morales says. They're not being asked to give things away but to charge fair prices.

Retailers admit that some price gouging is going on but they say they're being unfairly singled out. Most consumer goods in oil-rich Venezuela are imported but the government rations the sale of dollars that merchants need to make those overseas purchases. That forces them to buy dollars on the black market where the exchange rate is 10 times the official rate. To avoid selling at a loss, they jack up prices.

UNIDENTIFIED MAN: (Foreign language spoken)

OTIS: The frustration was captured in this TV news footage of a computer storeowner in the city of Puerto La Cruz, arrested for price gouging. In Caracas, merchants say they're also feeling the pressure.

DAVID BARROS: (Foreign language spoken)

OTIS: (Through Translator) In the past week, I've received more insults than in my entire life, says David Barros, who sells backpacks at the mall. They've called me a thief, a price gouger, a dog and a miserable wretch. But this is not my fault.

BARROS: (Foreign language spoken)

OTIS: Rather than profiting from the economic distortions, Barros and his business partner, Andres Simon, describe themselves as victims. Simon shows me a flimsy backpack worth about $25. But because it was purchased with black market dollars, he must charge the equivalent of about $250 to make a small profit. Not surprisingly, their sales have fallen 70 percent compared to last year.

BARROS: (Foreign language spoken)

OTIS: In the short-term, President Maduro's measures appear to have worked. Ruling party candidates won two-thirds of the mayoral posts that were up for grabs in nationwide elections on Sunday. But Simon predicts that the forced price cuts will only lead to more shortages.

To make his point, Simon leads me past the nearby Samsung and Sony stores whose shelves are bare. He says the owners were forced to liquidate at half price. Now, instead of importing more computers and TVs and selling at a loss, they've decided to shut down.